Memorandum submitted by UKPIA'S
The UK Petroleum Industry Association (UKPIA)
represents the UK oil refining and marketing interests of nine
oil refining companies. Our member companies supply most of the
transport fuels and other oil related products used in the UK.
As such, we have a major interest in the topic of road transport
fuels and the role of biofuels and welcome the opportunity to
respond to the Committee's consultation on this important issue.
Our responses to the Committee's Inquiry are
confined to those questions where we have specific knowledge or
expertise.
SUMMARY
UKPIA's views can be summarised as follows:
— The oil industry believes that due
to their low cost, on-going availability, and ease of use petrol
and diesel will remain the dominant road transport fuels globally
to 2030 and beyond, a view that is shared by the International
Energy Agency and others in their forecasts of future energy use.
However, a range of alternative fuels, including first generation
biofuels, will have a role to play.
— The industry is currently working
towards meeting the Government's target of replacing 5% by volume
of road fuels by biofuels by 2010-11 under the Renewable Transport
Fuels Obligation (RTFO) and the interim targets of 2.5% in 2008-09
and 3.75% in 2009-10. The introduction of biofuels represents
the biggest change to road fuels since the introduction of unleaded
petrol. Significant investment and time is being committed by
the industry at refineries and in the supply/distribution chain
to facilitate the introduction of biofuels and avoid any technical
difficulties that could affect consumers.
— Biofuels production raises a number
of issues over sustainability. The oil industry recognised these
issues several years ago and has been working in the LowCVP's
Fuels Working Group for the last four years to address them, where
possible, with sustainability and greenhouse gas reporting. The
reporting was intended as the first step towards a mandatory system,
preferably EU-wide. The issues of fuel versus food and displacement
(the switch of existing sustainable biomass to biofuel production
with the current biomass use being met by new unsustainable production
elsewhere) were also recognised but felt to be issues for Government.
In this respect we supported the use of a realistic buyout price
which drove the introduction of biofuels but also acted as a "safety
valve" if agricultural prices rose too much.
— Sustainability and greenhouse gas
reporting are vital to the acceptability of biofuels. The oil
industry has pushed the UK Government to lobby for similar criteria
to be incorporated into EU legislation to ensure commonality of
approach across the EU and to encourage compliance with sustainability
reporting standards in producing countries once these are established.
Greenhouse gas reporting is particularly important as biofuels
can produce differing greenhouse gas savings depending upon the
type of feedstock, its source and the conversion processes.
— In the UK, the RTFO is seen as a
one of several means of reducing CO2 emissions from road transport.
However, in most EU countries biofuels are seen as a means of
supporting the rural economy. This latter approach is reflected
in the targets set by the EU to replace a certain percentage of
road fuels with biofuels without any constraint on the greenhouse
gas emissions saved.
— The oil industry is actively developing
and/or deploying new technology which will reduce emissions of
greenhouse gases such as second generation biofuels, wind, solar,
carbon capture and storage, hydrogen and also fundamental research.
Energy efficiency is also being improved in the industry's operations
for example by installing gas fired CHP in refineries. This is
backed by active participation in groups like the Low Carbon Vehicle
Partnership and policy guidance from studies such as the Concawe/Eucar/JRC
well-to-wheels study of different alternative fuels.
— UKPIA believes that the UK's energy
policy should continue to be based on maintaining a reliable UK
energy system meeting all three pillars of sustainability—economic,
environmental and social—with clear targets underpinned
by a framework for their achievement. Policy objectives should
not be dominated by any one of these pillars and should also avoid
"picking winners". Sound science should be a cornerstone
of this policy to ensure goals are met cost effectively.
— The whole process of refining fuels
and producing the range of quality fuels that the market requires
is highly complex. The incorporation of biofuels into this mix
will increase complexity and it should not be assumed that replacing
petrol and diesel with biofuels will automatically improve security
of supply. For example, after a bad harvest or if bioethanol supply
to a distribution terminal is interrupted the supply of petrol
to the region served by that terminal will also be interrupted.
This is an extra risk that does not occur with 100% fossil fuels.
RESPONSES TO
QUESTIONS POSED
BY THE
COMMITTEE
Q1 What are the possible positive and negative
social, environmental and economic consequences of biofuels? How
might trade-offs between climate benefits and environmental and
social impacts be made? Is there a need to develop a new biofuel
strategy for the UK or EU, to balance the environmental, social,
economic and climate impacts of biofuels?
1. The positive aspects of biofuels include
a reduction in greenhouse gas emissions from the road transport
sector and support for the rural economy. The negative aspects
include:
— Competition between road fuel and
food potentially leading to higher food prices. There is may also
be future competition between biomass for road fuels and power
generation and between feedstock for some chemicals and road fuels.
— Biodiversity—reduction in numbers:
extinction of species eg orang-utan.
— Effects of monoculture on local food
production and local economies.
— Pollution and environmental damage
(water / soil / air), including related socio-economic impacts.
— Placing stress on the world's limited
water resources.
— Net greenhouse gas balances resulting
from land use change Deforestation -the destruction of High Conservation
Value Forest (HCVF).
— Land use change—eg destruction
of rain forest in Indonesia for palm and in Brazil for soy: ploughing
Cerrado in Brazil for sugar cane; planting on peat soils.
— Land rights, including economic and
physical displacement.
This is not an exhaustive list. The concerns
are real but not new.
2. In examining EU policies driving the
greater use of biofuels it is important that different national
priorities are borne in mind. At national level, there are three
main policy objectives behind the use of biofuels:
— supporting the agriculture sector;
— reducing EU dependence upon imported
oil; and
— reducing greenhouse gas emissions
from road transport.
In the UK, the main policy objective of the
Renewable Transport Fuel Obligation is reducing Greenhouse Gas
emissions from road transport, whereas in most other EU counties
the driver appears to be support for local agriculture.
3. Biofuels can lead to Greenhouse Gas (GHG)
emission savings compared with fossil fuels. However, the level
of saving is highly dependent upon the type of feedstock, the
source, method of cultivation, processes employed, and primary
energy inputs. Current biofuels can potentially offer around 50%
lower GHG emissions on average than fossil fuels, with the exception
of bioethanol from sugar cane, which could offer up to 89% greenhouse
gas reduction. However, as mentioned, GHG emission savings for
both bioethanol and biodiesel vary significantly depending on
sources and production routes. Furthermore, the uncertainty of
biofuels supply sources and in emissions from different biofuels,
particularly as global demand grows, would result in considerable
uncertainty in regard to the level of GHG emission reductions.
Concerns over sustainability also revolve around the effects of
intensification and expansion of agricultural activities associated
with energy crops, land use changes and forest clearance.
4. For this reason, it is important to make
comparisons of GHG emissions on like for like basis, often referred
to as "well to wheels" for petroleum products and their
substitutes ("field to wheels" calculation for energy
crops). The most comprehensive EU "Well to Wheels" study
(CONCAWE, EUCAR and JCR, 2005) concluded that biofuels such as
biodiesel: "are critically dependent on manufacturing processes
and the fate of by-products". The use of the by-product or
waste stream is particularly relevant in the calculation of GHG
saving, a good example being Brazilian ethanol from sugar cane
where the waste material is used to produce heat for the distillation
process. The study did not cover land use change but this has
been addressed in the reporting for the RTFO.
The table below set out likely reductions in
Greenhouse Gas Emissions on a well to wheels basis for some of
the products likely to be used to meet the RTFO:
Table 1
WELL TO WHEELS GREENHOUSE GAS EMISSIONS
|
| Fuel | Wells to Wheels Greenhouse
Gas Emissions
g CO2 equivalent/km
|
|
| Petrol | 196
|
| E5—95% petrol : 5% ethanol from sugar beet
| 193 |
| E5— 95% petrol : 5% ethanol from sugar cane(Brazil)
| 188 |
| Diesel | 164
|
| B5—95% diesel : 5% biodiesel from rape seed
| 160 |
|
Source: Concawe/JRC/Eucar 2005
5. Feedstock for biodiesel production such as palm oil
and soy has been widely associated with major land use change
and deforestation particularly in Latin America, Sub-Saharan Africa
and in South East Asia (FAO Report, Livestock's Long Shadow: Environmental
Issues and Options, 2006). Carbon stored in/on land is released
when that land's use is changed from say forest to arable land
or permanent grassland to arable land. However, estimates over
the release of carbon stored vary. Nonetheless, it is widely accepted
that emissions from certain land-use changes, particularly de-forestation,
are far greater than from the savings made by the biofuels produced
on the cleared land.
6. Second generation biofuels, ie from fermentation of
pre-treated straw, gasification of wood followed by Fischer-Tropsch
synthesis of diesel, etc, utilise a wider range of biomass material,
give better quality fuels, offer advantages in terms of CO2 reduction
and do not displace food crops. However, they are expensive and
at an early stage of development (DEFRA Biomass Task Force Report
2005) with trial plants at the demonstration stage, for example
the Choren wood gasification plus Shell Fischer Tropsch technology
for producing jet/diesel or the Iogen production of ethanol from
straw.
7. It is also important to address the potential social
impacts of biofuel production. A number of negative potential
consequences have been cited particularly in regard to developing
countries. Amongst the social issues of great concern are forced
labour and low wages, child labour, health and safety risks, as
well as displacement of people and food products by energy crops.
Equally, if properly managed with equitable benefits, the development
of biofuels could present a new income stream for developing countries.
8. Most fuel and technology solutions have trade-offs
in terms of relative environmental and economic impact and cost.
In case of conventional biofuels, aside from variations in greenhouse
gas savings associated with source material/processes, there are
differing views about sustainability and impact upon food prices.
In the case of the latter, it is reported that some of the recent
price increase in corn, wheat, soy and palm oil is associated
with increased demand for biofuels. However, the weather, growing
demand and changing tastes in rapidly developing countries could
be stronger factors as biofuel usage is still modest outside Brazil.
The RTFO will include both greenhouse gas and sustainability
reporting from April 2008. The oil industry supports the use of
sustainable biofuels and through the Low Carbon Vehicle Partnership's
Fuels Working Group, which has lead the development of a reporting
system and the criteria needed for sustainable biofuels, including
carbon emission from land use changes. Until this reporting is
both proven and operable UKPIA does not support setting targets
for biofuels in road transport beyond the current 5% level. This
will enable the issues of sustainability and any impact on food
prices to be fully addressed.
The reporting system uses a meta-standard approach that builds
on existing standards eg the Roundtable on Sustainable Palm Oil.
UKPIA believes that this approach offers the best way forward.
Along with the RSPO, RTRS (Roundtable on Responsible Soy) and
BSI (Better Sugarcane Initiative), other new biofuel crops will
have to be covered as well. It is also important to note the recent
improvement of the Assured Combinable Crops Scheme (ACCS), which
is widely used in the UK, which now covers all the sustainability
indicators required by the Renewable Transport Fuel Obligation.
The key to long-term biofuel use is Government action to
introduce sustainable reporting within the EU to generate strong
market pull that will encourage biofuel producing countries to
develop standards such as the Better Sugar Cane Initiative.
9. The economic benefits of biofuel expansion again vary
considerably. Within the EU, policy is applied within the framework
of the Common Agriculture Policy and applicable WTO rules, so
although there are benefits to the EU agricultural sector, the
climatic and available land mass advantages of material sourced
from overseas countries give some imports a competitive advantage
eg Brazilian ethanol from sugar cane. For developing countries
production of energy crops could present a valuable opportunity
provided important issues of sustainability are addressed.
10. Another aspect concerns the generally higher cost
of biofuels, which is passed on to the end consumer, and the variety
of fiscal incentives—both for growing/production and duty
rates— that many countries offer to producers. In the UK,
with the advent of the RTFO, the emphasis is moving away from
an incentive through a lower duty rate, to a buy-out penalty on
the fuel supplier for failure to meet the requisite obligation
on biofuel content.
Q2 Should biofuels be regulated to minimise the negative
environmental and social impacts, and in what way? How might regulation
fit in with international trade agreements and rules? Should there
be regulation of the entire carbon cycle of biofuels?
1. As outlined in our response to Question 1 above, UKPIA
supports the need for biofuels to meet environmental and social
standards.
2. However, we believe there are a number of hurdles
to be overcome before mandatory environmental standards can be
implemented:
— any system would have to be equitable for existing
biofuel producers/processes;
— a widely accepted set of criteria/indicators of
environmental performance would need to be agreed by all producers,
probably on a crop by crop basis;
— existing systems such as the Roundtable on Sustainable
Palm Oil (RSPO), the Roundtable on Responsible Soy (RTRS) and
the Better Sugarcane Initiative (BSI) need to be in operation
along with an UK/EU system in place (eg the equivalent of the
improved ACCS). This is potentially several years away, especially
as the focus of BSI seems to have shifted from absolute performance
to an improvement target;
— an EU-wide approach is required to drive the market;
and
— targets have to be "crop neutral" to
avoid a WTO challenge.
Once the reporting systems have been proven to operate successfully,
then the Government should push for the principle of sustainability
of biofuels to be incorporated into EU biofuels legislation.
3. Likewise, greenhouse gas accreditation is an important
aspect of the whole process for the reasons outlined above as
greenhouse gases saved depends on the type and source of the material
as well as the conversion processes involved. Again a proven,
accurate, operable system needs to be available before mandatory
requirements are put in place.
Q3 How successful are existing international structures,
such as the Roundtable on Sustainable Palm Oil, at ensuring that
imports of biofuels can be obtained from sustainable sources?
To what extent is it currently possible to identify the provenance
and production standards of imported biofuels?
1. The oil industry supports the use of sustainably sourced
biofuels and through the LowCVP's Fuels Working Group has helped
develop a reporting system and the criteria needed for sustainable
biofuels, including carbon emission from land use changes. The
reporting system used a meta-standard approach, which builds on
existing standards eg the Roundtable on Sustainable Palm Oil.
We believe that this approach offers the best way forward but
the systems required are not yet in place for all crops.
2. The RTRS (Roundtable on Responsible Soy) and BSI (Better
Sugarcane Initiative) are not developed yet so are of limited
use in the RTFO's early years. The RSPO should be operable around
the start of the RTFO. New biofuel crops will have to be covered
as well.
3. At the moment much of the source material for biofuels
is imported but also augmented in the case of biodiesel by re-processed
used vegetable oil. With the rapid expansion in biofuel feedstock
demand, the number of sources will increase, so for this reason
it is important that the reporting criteria referred to above
are put in place, as well as adherence to quality standards to
avoid potential significant quality problems when biofuel is blended
with conventional petrol and diesel. An important objective for
the industry is to put in place robust systems to ensure that
consumers discern no difference with the switch to biofuel blends.
Q4 At what stage is biofuel technology? Is there enough
support for the development of biofuel technology? A UN report
found that the climate change benefits of solid biomass fuels
outweigh those of liquid biofuels. Are current policies promoting
the development and deployment of a range of biofuel technologies?
How successful have EU strategies and Directives been in stimulating
biofuel usage? Will the 2010 biofuel target be reached? How effective
are the Government's fiscal arrangements for biofuels?
1. A variety of fuel and vehicle technologies have the
potential of delivering a significant reduction in greenhouse
gas emissions. These need to be compared on a "wells to wheels"
or "field to wheels" basis and the most cost effective
options encouraged, whilst maintaining a level playing field.
Biomass from short rotation coppicing or miscanthus used to generate
power, gives the best CO2 saving—see table 1 below.
Table 1
CARBON DIOXIDE EMISSIONS ABATED BY THE USE OF CURRENT
BIOFUELS
|
| Crop | Carbon dioxide saved
|
|
| Bio-ethanol from sugar beet for blending with petrol
| 3.8 te/ha |
| Bio-ethanol from wheat for blending with petrol
| 1.3 te/ha |
| Bio-diesel from rape seed for blending with diesel
| 2.0 te/ha |
| Biomass (SRC or miscanthus) used to raise power
| 16.0/te/ha |
|
Source: Concawe/JRC/Eucar 2005
2. There are a number of emerging second generation biofuels
based on non-food crop biomass. The production of synthetic diesel
from wood (ie biomass to liquids or BtL), is currently at the
process demonstration phase with the Choren "beta" plant
in Germany. This plant will demonstrate the process and provide
design information for the first commercial scale plant, which
could be in operation by 2015. The major barriers to the widespread
use of BtL technology include proving its viability in terms of
technology, the high capital cost, and the need to establish the
necessary large supply of sustainable biomass. (Cost information
on BtL is available from the National Non-Food Crops Centre at
Heslington, near York.) Ethanol from straw would have a slightly
shorter timescale, but still needs to be commercially proven.
On the other hand, the production of biogas (bio-methane) from
waste etc. is established technology, widely used in the UK for
power generation. However, the use of wood, waste etc, to generate
electricity will, in most cases, give a greater reduction in greenhouse
gases than if converted to road fuels.
3. In reducing GHG emission, the most effective uses
of biomass should be encouraged, not just conversion to road fuels
which is a less cost effective method of saving GHGs, For biomass
this would mean extending its use from transport fuels to heat
and power generation. In the UK, studies by a number of groups,
including the DEFRA Biomass Task Force lead by Sir Ben Gill in
2005, have highlighted the higher potential and lower cost per
tonne of carbon saved. This application may also be of greater
benefit to security of energy supply than conversion of biomass
to liquid road fuels. An example is Denmark, which in 2003, obtained
over 11% of its energy from biomass: mostly straw, wood, agricultural
waste, general waste and wood waste.
4. The oil industry is already undertaking or supporting
research and development into a range of biofuel/biomass sources
and processing technologies. These include `second generation'
processes to produce ethanol from the fermentation of ligno-cellulose
from straw or diesel from the gasification of wood followed by
the use of the Fischer-Tropsch process. Indeed, second generation
biofuels utilise a wider range of biomass material, give better
quality fuels, offer advantages in terms of GHG reduction and
do not displace food crops. However, as mentioned above, they
are relatively expensive and the technologies are yet to be demonstrated
on a commercial scale.
5. In addition to the processes above, current research
also encompasses incorporation of biofuels into refining processes
(hydrogenation of biodiesel or conversion of vegetable oils to
biodiesel with bio-ethanol instead of methanol from fossil fuels),
as well as examining the effects of different fuels and blends
with engine and exhaust clean-up technologies.
6. As regards targets, UKPIA has advised the Dept. for
Transport that the RTFO's biofuels 2010-11 target of 5.2632% of
fossil fuel sales (=5% of total road fuel sales) is unlikely to
be fully met. A margin of safety is required to ensure that the
5% limit on ethanol in petrol and FAME (biodiesel) in diesel set
in the European Fuels Standards are not breached and vehicle warranties
invalidated. High blend biofuels eg E85 or B30 are niche products
and will not fill the gap, especially as their use will significantly
increase the cost of fuel for the motorist. They would also require
new national distribution systems, which would be expensive. This
will result in companies paying the buy-out price for the small
volume affected rather than introducing expensive high biofuels
blends and in-turn motorists paying for carbon reductions that
are not delivered. UKPIA believes that targets set should be stretching
but achievable. UKPIA also believes that additional biofuels targets
should not be set until the RTFO's sustainability reporting has
been proven. This will result in a short delay in setting but
not achieving the 2020 targets for 10% biofuels in petrol/diesel
adopted by the EU's 2007 Spring Council.
7. Fiscal and regulatory policy can do a great deal to
encourage early adoption of technology. Experience in the UK has
indicated that consumers need to be incentivised via fiscal measures,
to take up new fuels that are more costly than conventional petrol
or diesel (eg leaded petrol, ultra low sulphur diesel, biofuels
etc). However, it is important that "winners" are not
chosen by favouring a particular technology with advantageous
fiscal treatment. To date, most EU Member States have adopted
the approach of duty reductions, or in some cases, exemption from
duty, for biofuels in order to kick-start the market. In the UK,
the fiscal stimulus (duty reduction of 20ppl introduced start
of 2005 for ethanol and 2003 for biodiesel) has had the effect
of boosting demand for biodiesel and bioethanol, prompting the
construction of a number of new plants. This approach is not sustainable
in the long-term in terms of cost to the taxpayer.
8. However, it should be noted that biofuel producers
in the UK have expressed concern that an obligation and fiscal
incentive may be required in the early stages of the RTFO to ensure
that development of the sector is underpinned.
Q5 The EU Strategy for Biofuels claims that biofuels "are
a direct substitute for fossil fuels in transport and can readily
be integrated into fuel supply systems". What proportion
of UK domestic transport and energy generation could be fuelled
by UK-produced biofuels? Is it possible for biofuels to entirely
replace oil for transport purposes? Is there a role for public
procurement or public transport? Will biofuels improve fuel security?
How secure are biofuel crops from unexpected events such as drought
or disease?
1. An advantage of biofuels is that in the main they
can be blended up to a low limit (currently 5%) with conventional
petrol and diesel and distributed through the same systems. In
the case of ethanol into petrol this will be done at road loading
points to avoid the risk of moisture "pick up" being
transferred to other fuels in multi-product pipelines.
2. Assuming that all the biofuel production planned is
built and the product used domestically then all the biodiesel
and bioethanol required to meet the 2010-11 RTFO target will be
produced in the UK. However in practice some biofuel will inevitably
be imported. In the longer term the UK could supply around 10%
of its road fuel needs from first generation biofuels using current
arable land and current exports of wheat. Second generation biofuels
could extend this figure.
3. Furthermore, the International Energy Agency states
that, whilst at present biofuels represent 1% of global transport
fuel, they could account for 7% by 2030 (the limit of their forecast)
but that the use of fossil fuel in global transport will still
increase in absolute terms. This is in line with other forecasts,
ie ExxonMobil's below:
Post 2030, oil will continue to be a major source of transport
fuels. For instance, the World Business Council for Sustainable
Development's Report "Pathways to 2050" forecasts that
fossil fuels will supply 60% or road transport fuels with hydrogen
(25%) and biofuels (15%) making up the balance.
The Markal model used for the 2007 Energy white Paper gives
a range of results for different scenarios; for example:
The average over a number of the Markal scenarios given below
highlights there is still a significant role for petrol and diesel
in 2050.
Average share of transport fuels in 2050 from Markal
model over range scenarios
|
| Fuel | Predicted Market Share
|
|
| Petrol | 20%
|
| Ethanol | 6%
|
| Methanol | 2%
|
| Diesel | 26%
|
| FT Diesel | 26%
|
| Bio Diesel | 5%
|
| Hydrogen | 11%
|
| CNG | 0% |
| Electricity | 4%
|
|
4. It can be concluded, therefore, that over the next
25 years liquid fuels will continue to dominate the road transport
market. As shown, these will be predominately fossil fuels (petrol
and diesel) with limited penetration of biofuels. Gaseous fuels
will play a limited role until hydrogen / fuel cells are ready
for the mass market (estimated at 2030+). At the same time the
development of alternative fuels eg synthetic (Fisher Tropsch)
diesel from biomass, needs to continue. Indeed, a variety of fuel
and vehicle technologies have the potential to deliver a large
reduction in GHG emissions, in combination with improved vehicle
fuel efficiency and changes in consumer behaviour with regard
to vehicle purchasing decisions and use.
5. The European technical fuel standards body CEN is
examining the feasibility of increasing the current 5% by volume
limit of biofuel blended with conventional petrol and diesel,
possibly to 10%. At the moment the main biofuel constraint appears
to be on the supply side (crops and processing capacity) rather
than technical standards.
6. As regards security of supply and reducing dependence
upon imported fossil fuels, the European Commission's scenarios
on sources of biofuels in 2020 (European Commission's Biofuels
Progress Report staff Working Document SEC, 2006, 1721/1, 10 January
2007, Table 1) shows that even considering the lowest level of
biofuels' usage, which would equal to 7% of energy in road fuels),
imports will play a crucial part.
European Commission Scenario for Source of Biofuels—7%
of road fuel energy case
Source European Commission
7. Furthermore, as the EU, Japan and the USA etc. incorporate
biofuels into their petrol and diesel, the demand for biofuels
will soar. This could lead to physical shortages of sustainable
biofuels, especially in case of a poor harvest. Setting future
targets once the availability of sustainable biofuels is better
known would be a prudent course to adopt.
8. Moreover, bioethanol for instance will certainly play
a part in further reducing the UK demand for petrol (already 25%
lower in volume terms vs.1990) which is already in surplus in
the UK. The excess has to be exported to the USA, as the whole
of Europe already produces excess petrol. However, if the US continues
to pursue its own biofuels programme, then its market may not
be open for UK exports. This in turn could lead to closure of
a UK refinery with a subsequent reduction in security of supply
for other transport fuels, such as jet fuel where the UK relies
heavily on imports. In addition, the production of finished petrol
at distribution terminals could also lead to temporary stock outs
if fuel quality issues are encountered or in case of bioethanol
supply issues.
9. When biofuels become an established part of the overall
fuel mix, issues of their continuity of supply and quality will
become additional significant factors in an already highly complex
process of producing the fuels that consumers require in a timely
fashion. Consequently, UKPIA feels that security of supply issues
should not be overlooked or assumed that biofuels will necessarily
improve security of supply.
Q6 What impact would an expansion of UK production of biofuels
have on the ability of the UK to produce its own food? How might
this impact on greenhouse gas emissions from international trade
patterns? What impact might the expansion of biofuels have on
international food security and prices?
1. It is estimated that meeting the current RTFO target
for 2010-11 would create a UK biofuel requirement of approximately
two million tonnes per year, requiring in the order of 1.3 million
hectares of land given over to production of biofuel crops. This
is well below the two million hectares of available arable land
indicated in a 2002 report from DEFRA so would not affect food
production, unless crops for power generation were also grown
extensively. The amount of land required would be reduced if the
3 million tonnes of wheat currently exported was used to produce
bioethanol. This indicates that domestic production of first generation
biofuels could substitute around 10% of conventional petrol and
diesel, provided only a limited area of land is used to grow crops
for power/heat. However, better use of biomass, particularly waste
material or by-products, in power production would lessen the
impact on land available for food production.
2. UKPIA recommends a cautious approach to increasing
the biofuel content of fuels beyond those currently required by
the RTFO, in order to allow time for the reporting systems on
carbon and sustainability to be fully developed and for the impacts
on biofuel supply and prices to be assessed before a further major
expansion is set in train.
3. Clearly there will be an effect upon prices of energy
and food crops until demand and supply become more closely aligned.
Although there may be "surplus" production of food crops
any reduction in one country by alternative use leading to reduced
exports, needs to be counterbalanced elsewhere if prices internationally
are not to be affected. Furthermore, the increased linkage of
the price of energy crops with those for conventional fuels, as
a result of growing biofuel demand, will be an additional factor
in pricing, aside from the direct pricing consequences of increased
physical demand for crops for competing uses.
4 October 2007
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